While there are several financial centers all around Europe, it is London that market participants keep their eyes on.
Historically, London has always been at a center of trade, thanks to its strategic location.
Today, London benefits from its timezone. London’s morning overlaps with late trading in Asia and London’s afternoon overlap with New York City.
It’s no wonder that it is considered the forex capital of the world with thousands of folks making transactions every single minute.
About 43% of all forex transactions happen in London.
Some traders also refer to the London session as the “European” trading session.
That’s because aside from London, there are major financial centers open in Europe as well, such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.
Here are some neat facts about the European session:
- Because the London session crosses with the two other major trading sessions–and with London being such a key financial center–a large chunk of forex transactions take place during this time. This leads to high liquidity and potentially lower transaction costs, i.e., lower pip spreads.
- Due to the large number of transactions that take place, the London trading session is normally the most volatile session.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- Volatility tends to die down in the middle of the session, as traders often go off to eat lunch before waiting for the New York trading period to begin.
- Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.